Aside from actually building your business, asking others to invest in your company is the hardest thing a founder will do.
You can find all sorts of tips across the web on how to find investors, how to structure your term sheets and almost every other detail you’ll need to know. It’s what not to do that isn’t shared often.
- $250,000 is the minimum to raise. Anything less will send the wrong signals to professional angels and VCs.
- Never be an investor’s first deal. It’s hard enough to get professional investors to commit to your deal, why make things harder on yourself by dealing with someone that may not be prepared for the risks associated with early stage investing?
- The smaller the check, the bigger the headache. The minimum check size you should take directly into your company is $25K. Anything smaller needs to get routed into an AngelList Syndicate (here’s mine) or rolled up into some other SPV (ask your local angel group about this).
- Raise 18 months of capital or nothing at all. Once you step on the venture treadmill, the expectation is that you’ll raise more money at a higher valuation roughly every 12-18 months. If you raise too little capital, you’re unlikely to hit the milestones needed to get that next round. Don’t set yourself up to fail.
- Investors check references on founders. Founders need to check references on investors. Check AngelList. Ask other founders in their portfolio. Read what others might have said about them anywhere else online. The truth of the matter is that it’s easier to divorce your spouse than to “undo” an investment. Trust me on this.
- Use AngelList to fill your round, not start it. The same is true for any other online fundraising service you choose to use. Getting the first person to commit is a function of handshakes and time — actual meetings.
Also published on Medium.